The Green Sheet Online Edition

May 24, 2010 • Issue 10:05:02

Industry Update

NEWS

Senate passes interchange amendment

In a development that may lead to dramatic change in the payments industry, the so-called Durbin amendment to the financial services reform bill passed the U.S. Senate by a 64 to 33 vote. The amendment would mandate the Federal Reserve Board to regulate interchange.

In a statement following the vote on May 13, 2010, Sen. Dick Durbin, D-Ill., said, "Passage of this measure gives small businesses and their customers a real chance in the fight against the outrageously high 'swipe fees' charged by Visa and MasterCard."

But MasterCard Worldwide believes otherwise, arguing that the amendment "will reduce competition and hurt consumers" because big retailers will not pass onto consumers the savings from lower interchange fees.

According to Hank Armour, President and Chief Executive Officer at the NACS, the Durbin amendment "would give equality for check card and paper check fees - meaning that debit interchange, or 'swipe,' fees could be significantly reduced or eliminated."

The Electronic Transactions Association, the payments industry's leading trade group, is opposed to the amendment. In a statement, ETA CEO Carla Balakgie said the amendment will "likely reduce credit availability for merchants and consumers, and raise the price of existing credit."

A similar financial reform bill is working its way through the U.S. House of Representatives. But the House bill reportedly does not contain the same interchange language as the Senate bill. The ETA urges all payment professionals to make their opinions known by contacting their senators. Phone numbers and website addresses can be found at www.senate.gov/general/contact_information/senators_cfm.cfm.

CO-OP, the nation's largest credit union service organization, has involved itself in the political game before. Last year CO-OP was part of the Electronic Payments Coalition opposing the creation of a bill regulating interchange.

"The three amendments currently being debated are bad for credit unions and bad for their members, jeopardizing the right of credit unions to a fair interchange rate and allowing merchants to interfere with consumer choice," said Stan Hollen, President and CEO of CO-OP. "We urge everyone in our industry to write to their senators immediately."

NRF endorses Vermont credit card bill

The National Retail Federation urged Vermont Governor Jim Douglas to sign legislation recently passed by the Vermont legislature that would allow Vermont retailers to set a minimum credit card purchase of up to $10 without interference from Visa Inc. and MasterCard, whose rules bar minimum purchase amounts.

Card companies would also be prohibited from blocking merchants from giving discounts for cash, checks, debit cards or credit cards with lower-than-usual swipe fees. Visa and MasterCard also could not force retailers to accept cards at all store locations of a given retailer if the retailer only wanted to accept them at some locations.

MasterCard stated that allowing merchants to set minimum amounts for card purchases would require shoppers "to spend more than they might have intended if they choose to use a payment card.

"The legislation would restrict consumer choice, and allow merchants to circumvent MasterCard rules that prevent consumers from being penalized for preferring to use an electronic payment card."

MasterCard also pointed out that the new Vermont law and MasterCard's existing rules provide merchants "the right to offer a discount for cash and all forms of payment, including competing card brands.

"Using discounts to steer customers to another form of payment is preferable to minimums, as it would not lead consumers to spend more than originally intended."

New interchange rates from MasterCard

MasterCard typically sets new interchange rates each April, and 2010 was no exception. You can access a PDF of the company's latest rate schedule at www.mastercard.com/us/merchant/index.html. Alternatively, you can always access MasterCard's and Visa's rates via the Resources tab just below the masthead on The Green Sheet's home page.

Alternet Systems Inc. presented a webcast about its new mobile security division, International Mobile Solutions, created in late 2009 to address security concerns when deploying mobile commerce and transaction services. IMS' aim is to expand Alternet's mobile security services to the global mobile security market, which is expected to surpass $4 billion in 2014, according to a January 2010 ABI Research study.

BHI rolls out new anti-virus service

BHI Advanced Internet Inc. is offering a new anti-virus service called SecureConnect that reportedly helps protect computer systems from viruses that can disrupt networks, delete data, or expose businesses to hackers and thieves. The managed anti-virus service alerts BHI support staff to problems that may occur on the system in real-time, including missed virus updates, removal of outdated anti-virus software and detection of viruses.

Federated unveils ISO program, agent portal

At the Electronic Transactions Association's 2010 Annual Meeting & Expo, Federated Payment Systems LLC, a provider of credit card processing and related merchant account services, presented its program for bringing U.S. ISOs into the Canadian market.

Global Payments Asia-Pacific Ltd., a joint venture between the U.S.-based Global Payments Inc. and The Hongkong and Shanghai Banking Corp. Ltd., has launched China UnionPay (CUP) card acceptance service in Brunei, the Maldives, the Philippines, Singapore and Sri Lanka. This service allows mainland Chinese tourists to pay for goods and services with their CUP cards at merchants served by Global Payments.

Pinnacle Financial Group Inc. now offers unembossed, instant-issue debit cards at all of its 35 offices in Middle Tennessee and the Knoxville area. Offices can now issue debit cards with PIN numbers in two to three minutes instead of the 10 days previously required. Instead of being embossed with raised letters and numbers, the plastic cards are created with a new, flat card technology that makes the card information easier to read.

SmartMetric Inc. will open up its own manufacturing facility to produce advanced "in card" fingerprint scanning and matching technology, moving from research and development to commercial manufacturing and production. According to SmartMetric, banking cards of the future using the company's technology will allow a person's fingerprint to activate the user's card.

Sterling introduces next-gen solution

Sterling Commerce, an AT&T Inc. company, introduced the next generation of Sterling Total Payments. The new version provides banks with tools that can incrementally generate additional fee revenue through new capabilities for integrated payables and advanced fraud mitigation. In addition, it helps financial institutions reduce payment processing costs.

TF moves into additional mobile platforms

At the ETA's 2010 Annual Meeting & Expo, TF Payments Inc. heralded its intention to add Google Android-based smart phones and the Apple Inc. iPad to its qualified device list for its flagship product FocusPay. A teaser demo on an iPad was presented at the show along with its version of a "card swipe" device for iPhones.

TransFirst adds small business financing product

TransFirst, a transaction processor, and American Finance Solutions, a provider of merchant cash advance, teamed to provide small and mid-sized businesses access to working capital. Through a joint referral relationship, TransFirst is expanding its product portfolio to include AFS' cash advance product, helping clients to access capital within 48 hours, despite tightening credit markets.

Trustwave delivers new data privacy program

Trustwave, a provider of information security and compliance solutions, launched a data privacy program comprised of security services that help businesses protect their customers' personally identifiable information and other sensitive data. Data privacy laws already exist in 46 states and federal legislation designed to protect such information is pending.

First Data Corp.'s STAR Network signed a multiyear agreement with debit card issuer SunTrust Banks Inc. to provide PIN-secured debit POS and ATM access to cardholders. SunTrust has approximately 1,700 retail branches and 2,800 ATMs across the Southeast and Mid-Atlantic United States. STAR, a leading electronic funds transfer network, has more than 2 million retail and ATM locations.

With dynamic currency conversion, international MasterCard and Visa card customers can pay in their home currencies at the POS.

World Bank, Gemalto team for digital security

The World Bank Group and Gemalto NV signed a memorandum of understanding to help support social and economic advancement in developing countries with innovative information and communication technology. This collaboration forms a part of the World Bank's new eTransform Initiative and is expected to help governments gain greater access to best-in-class technology, expertise and practices.

The ePadLink line of products includes the ePad, ePad Ink, ePad LS, ePad Vision and ePad ID Pro line of products and accessories. The Integrisign software includes Integrisign Desktop, Pro, and Emcee signature server products, along with corresponding Universal Installer software and utilities.

Through strategic partnerships with more than 50 providers of information processing and online banking solutions, iPay's turnkey online bill pay services and technology support more than 3,600 banks and credit unions, according to iPay.

APPOINTMENTS

Allman to head CO-OP board

Doug Allman, President and CEO of NASA FCU, was elected chairman of the board of directors of CO-OP Financial Services. His election to a one-year term came at the annual meeting of CO-OP shareholders in April 2010.

#H2 Chung, Rasori, Dolique tapped by SPVA

The Secure POS Vendor Alliance, a nonprofit organization founded by Hypercom Corp., Ingenico S.A. and VeriFone, named TK Cheung to the position of SPVA Chairman of the Board.

Vanco Services LLC appointed Michael Foye to the position of Senior Vice President. In this new role, Foye will be responsible for growing the company's custom solutions business. Foye is an industry veteran with several years of experience in the field of electronic transactions.

Foye comes to Vanco Services following a long career with MasterCard.

WSAA adds to advisory board

The Western States Acquirers Association expanded its advisory board to include three members of the bankcard industry: Gregory Holmes of Holmes Associates; Mia Hyun of Mobius Payments; and Linda Horwath from JCB International Co. Ltd.

Yates to advise Advent

David Yates joined the Operating Partner Programme at Advent International, a global private equity firm, to provide advice on investment opportunities in the financial services sector.

Yates will focus on the area of payments and transaction processing and will work with Advent's deal team in London, supporting the firm's investment activities globally.

BOTTOM LINES

Nearly a third of consumers (31.2 percent) in the market for electronics items shop at Best Buy, according to the BIGresearchConsumer Intentions & Actions Survey conducted in April 2010; 21 percent opt for discounter Wal-Mart Stores Inc.

The NPD Group reported that roughly $1.1 billion was spent in April 2010 on video games in the United States. This represents a 6 percent increase over the same period in 2009.

According to market research firm Kantar Retail, overall retail sales increased 1.2 percent in April from a year ago, which was significantly lower than the 9.2 percent jump in March but well above the 2.3 percent decline in April 2009.

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